TransDigm Group Incorporated has completed a significant debt financing package totaling $2 billion to support its ongoing acquisition strategy. This financing includes the issuance of $1.2 billion in senior subordinated notes and the addition of $800 million in new term loans under its existing credit facility. The proceeds will primarily fund the previously announced acquisitions of Stellant Systems, Inc., Jet Parts Engineering, and Victor Sierra Aviation Holdings, along with related transaction costs.
This move reflects TransDigm’s continued use of leverage to expand its aerospace components portfolio, balancing long-term fixed-rate debt with variable-rate credit facility borrowings.
Key details:
Senior Subordinated Notes:
- TransDigm issued $1.2 billion of 6.125% senior subordinated notes due July 31, 2034.
- The notes were sold at par (100% of principal) in a private placement to qualified institutional buyers and non-U.S. investors.
- Interest on the notes accrues from February 13, 2026, and is payable semiannually on January 31 and July 31, starting July 31, 2026.
- The notes rank as senior subordinated debt, meaning they are junior to TransDigm’s senior secured debt but senior to any subordinated debt that is expressly subordinated to these notes.
- The notes are guaranteed on a senior subordinated basis by TransDigm’s parent company and certain subsidiaries that are borrowers or guarantors under its senior secured credit facilities.
- The indenture governing the notes includes customary covenants restricting TransDigm’s ability to incur additional debt, pay dividends, repurchase stock or debt, make investments, sell assets, or engage in certain transactions without lender consent.
- The notes include change of control provisions requiring TransDigm to offer to repurchase the notes if certain ownership changes or asset sales occur.
- Events of default include bankruptcy and insolvency triggers that would accelerate repayment.
New Term Loans:
- TransDigm also drew $800 million of new tranche N term loans under an amendment to its existing credit agreement.
- These term loans mature on February 13, 2033, and bear interest at Term SOFR plus a 2.50% margin.
- An original issue discount of 0.125% was paid to lenders.
- The terms of the new term loans are substantially consistent with the existing term loans under the credit facility.
- The amendment to the credit agreement was executed simultaneously to accommodate the new tranche and related borrowings.
- Goldman Sachs Bank USA continues as administrative and collateral agent for the credit facility.
Use of Proceeds and Strategic Context:
- The net proceeds from the notes and term loans, combined with cash on hand, will fund the aggregate purchase price for the acquisitions of Stellant Systems, Jet Parts Engineering, and Victor Sierra Aviation Holdings.
- These acquisitions are part of TransDigm’s strategy to expand its aerospace components business through targeted bolt-on acquisitions.
- The financing structure balances fixed-rate long-term debt with floating-rate credit facility borrowings, providing flexibility and cost management.
Implications for investors:
- The new senior subordinated notes increase TransDigm’s leverage but at a fixed interest rate that locks in borrowing costs for over eight years.
- The addition of $800 million in term loans at a floating rate adds some interest rate exposure but extends the maturity profile of the company’s credit facility.
- The covenants and change of control provisions in the notes and credit agreement maintain lender protections and limit certain corporate actions, which may influence TransDigm’s financial and strategic flexibility.
- The financing supports TransDigm’s acquisition-driven growth strategy, signaling management’s confidence in expanding its aerospace components portfolio through these recent deals.
- Investors should note the senior subordinated notes rank below senior secured debt, which remains in place, preserving the capital structure hierarchy.
Overall, this financing package equips TransDigm with substantial capital to complete its announced acquisitions while maintaining a balanced debt maturity profile and preserving covenant protections for lenders.